INDIANAPOLIS - The Republican who replaced Mike Pence on the ballot for governor of Indiana broke with his political benefactor on Monday, stating that Syrian refugees should be allowed into the state despite Pence's insistence that they pose a security risk.

Remarks by Lt. Gov. Eric Holcomb, who was Pence's preferred successor, came the same day a federal appellate court in Chicago rebuked Pence for his unsuccessful efforts to stop the Archdiocese of Indianapolis and other groups from settling Syrian refugees.

"I would honour what the court said. I wouldn't go against the court ruling," Holcomb said during a press conference following a gubernatorial debate. "I would continue to allow the refugees to come in here and find safe haven."

He spoke one day before Pence, who is Donald Trump's vice-presidential running mate, debates Democrat Hillary Clinton's vice-presidential hopeful Tim Kaine. Trump and Pence have made restrictions on immigration and refugees a major plank of their campaign.

In Indiana, damage to the state's reputation under Pence has emerged as a potent campaign issue that Democratic candidate for governor, John Gregg, hopes to capitalize on. Pence's tenure was punctuated by his steadfast support for conservative social issues that at times drew unwanted attention to the state, most notably when a religious objections law he signed provoked a national backlash from critics who said it could sanction discrimination against gay people.

Gregg commended Holcomb for saying he would welcome the refugees, but said conservative social issues pushed by Republicans have given the state a black-eye.

"That's what happens when you get in dealing with these social issues," said Gregg, a former statehouse speaker who narrowly lost to Pence in 2012. "Again Indiana has been embarrassed, again we've sent unnecessary tax dollar for litigation. And it is wrong."

On Monday, the court said Pence's warnings about the threat of terrorism by refugees amounted to "nightmare speculation."

The candidates for Indiana governor faced off in a town hall forum, with Holcomb arguing for a continuation of the economic development policies of recent Republican administrations, while Gregg called for passing civil rights protections based on gender identity and sexual orientation.

Holcomb sought to align himself with the state's popular former governor Mitch Daniels while criticizing the fiscal management of state government in the late 1990s, when Gregg was House speaker and Republicans held power in the Senate. The state cut taxes while expanding spending, blowing through the state's budget reserves.

Holcomb, whom Pence appointed as lieutenant governor in March, has said the state's balanced budgets and strong reserves help attract business investment to Indiana. He touted those policies for helping drop the state's unemployment rate to 4.5 per cent in August, below the national mark of 4.9 per cent.

But he has consistently tried to duck talk of social issues and says there's no appetite to take up LGBT rights in the Legislature.

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